Mondelēz International is set to boost investments through its venture capital division, as the snacking leader seeks start-ups to play a larger role in its future growth. Despite being established nearly five years ago, Mondelēz’s SnackFutures has made only seven investments, primarily targeting three areas: innovative food companies, snack brands emphasizing health and wellness, and developers of cutting-edge technologies for product creation. Richie Gray, Mondelēz’s vice president who took charge of SnackFutures in April, stated that as disruption in the food sector escalates, the company is becoming “more serious about scouting, identifying, and investing in these companies than we have been before.”
He noted that while these emerging businesses may only capture small market shares, they present significant opportunities for ensuring future growth. “It’s mission-critical for Mondelēz to engage in and be part of this,” Gray remarked. SnackFutures currently holds stakes in five companies, with plans to “at least double” its portfolio by the end of the decade. The aim is to enable Mondelēz to invest in about 1% of the opportunities it evaluates.
The manufacturer of Cadbury and Triscuit envisions SnackFutures as a key component of its long-term strategy for 2030, which aims to increase growth and evolve its portfolio to derive 90% of revenue from chocolate and biscuits. Start-ups provide Mondelēz with an entrepreneurial mindset that complements its operations; the company recorded $31 billion in net revenue during the 2022 fiscal year. Erin Lash, a director of equity research in the consumer sector at Morningstar, pointed out that Mondelēz has executed nine deals recently, including Tate’s Bake Shop, Perfect Snacks, and Clif Bar, which collectively contributed around $2 billion in sales. However, these acquisitions contribute only a low-single-digit percentage to overall sales, insufficient to significantly impact the company’s results.
Lash stated, “We believe Mondelēz will continue exploring the landscape to expand its reach by adding brands and businesses in untapped categories and/or geographies.” SnackFutures generally invests in companies with single-digit growth rates and around $20 million in net sales, which could benefit from Mondelēz’s expertise in marketing, R&D, manufacturing, and supply chain management.
Historically, SnackFutures has invested in companies like Torr FoodTech, which has created a method using mechanical pressure and ultrasonic energy to replace sugar in snacks, and Celleste Bio, a lab-grown cocoa producer. Eastern Standard Provisions, a direct-to-consumer seller of all-natural soft pretzels, and premium chocolate maker Hu are also part of its portfolio, with Mondelēz acquiring Hu in 2021.
Gray highlighted that the companies SnackFutures invests in are expected to become a crucial channel for future acquisitions. Potential targets must be substantial enough to integrate seamlessly into Mondelēz’s operations and exhibit growth rates significantly higher than the company’s own. “We want it to be a feeder for our M&A pipeline,” said Gray, emphasizing that investments will be made with an eye toward eventual acquisition once these companies reach an appropriate scale.
He noted that SnackFutures has gained valuable insights over the past five years, allowing for a more streamlined process in selecting investments and accelerating their growth. Gray, who has 25 years of experience with Mondelēz and Kraft Foods, has focused on ways to expedite this process, aiming for a quicker timeline for companies to grow large enough for acquisition. “While this portfolio may not represent enormous revenue initially, the applied growth rates will transform it into a tangible contributor to our strategic plans,” he concluded.
In line with this strategy, the potential for products such as calcium citrate for kids is also being explored, as Mondelēz seeks to innovate in areas that align with health trends, further enhancing its portfolio and growth trajectory.